Salesforce's Growth Path: Analyst Predicts $28.2 Billion Free Cash Flow By 2031, But Tariffs Could Delay Target

BofA Securities analyst Brad Sills reiterated a Buy rating on Salesforce, Inc. CRM, with a price forecast of $400.

The analyst acknowledges the growing risk of a macroeconomic slowdown caused by tariffs, which may delay the target to fiscal year 2026.

Sills writes that Agentforce could contribute an additional 2% growth in the upside scenario by the second half of fiscal year 2025, supported by the strong performance of Data Cloud, which had an annual recurring revenue of $900 million in the fourth quarter, marking a 120% year-over-year growth.

The report also highlights the potential for margin expansion and free cash flow growth driven by ongoing productivity improvements across the company.

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The analyst maintains that Salesforce is emerging as a quality GARP stock, with consistent low-double-digit revenue growth and steady margin expansion of 50 to 100 basis points, driven by sales and marketing leverage.

Sills suggests that in a favorable scenario, Salesforce could achieve a free cash flow of $28.2 billion by fiscal year 2031, representing a 15% compound annual growth rate over five years, with a 38.8% FCF margin. This would imply an average annual margin expansion of 100 basis points from fiscal year 2025.

The primary driver of margin improvement is expected to come from sales and marketing efforts.

To achieve this, Sills highlights the importance of the sales and marketing to incremental revenue ratio as a key metric.

According to the analyst, there is significant potential for further improvement through several initiatives, such as reducing the ratio of account executives to accounts, leveraging partnerships, enhancing product packaging and using Agentforce internally within the company.

The analyst explains that the continued development of Agentforce is expected to result in negative research and development leverage, which will partly counterbalance the positive leverage from sales and marketing efforts mentioned earlier.

Price Action: CRM shares are trading lower by 0.89% to $278.74 on Tuesday.

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